(6.3) Money and Banking

Front

What is the main role of the Federal Reserve in the U.S. banking system?

Back

To act as the central bank and hold reserves

Front

In the example, how much money does Wells Fargo have in excess reserves after the initial deposit?

Back

$450

Front

What happens to the money supply when banks lend out their excess reserves?

Back

It increases

Front

What is the money multiplier in the given example?

Back

10

Front

What might banks do in times of higher risk regarding their deposits? Options: Lend more than 90% of deposits, Hold more than the required reserves, Stop lending completely, Increase the reserve ratio

Back

Hold more than the required reserves

Front

What do banks do with most of the money they receive from deposits?

Back

They lend it out to others.

Front

Why do banks need to keep some money in reserve?

Back

To ensure they have cash for customer withdrawals.

Front

What happens to the $9,000 when it is lent out by the bank?

Back

It is used by another business and then redeposited.

Front

What is a bank run?

Back

A situation where everyone withdraws their money at once.

Front

How do regulators help prevent bank runs?

Back

By providing loans and insurance to banks.